Guardian: “Damning allegations that Barclays cheated and defrauded its customers pushed shares in the besieged bank to their lowest levels in 18 months on Thursday and set back attempts by its boss Antony Jenkins to turn around its troubled reputation.”“The shares were the biggest fallers in the FTSE 100, at one point losing 9% before closing 6.5% lower at 215p – wiping £2.4bn off the value of the bank.
The fall was prompted by a lawsuit filed overnight by the New York attorney general, Eric Schneiderman. He accused Barclays of “a systematic pattern of fraud and deceit” over the way it operated its “dark pool” private trading system.Schneiderman said the dark pool – a means by which traders can remain anonymous until they have completed trades and which was publicised in a recent book on Wall Street by Michael Lewis – was used to favour high-frequency traders, contrary to promises made in marketing literature.
“Barclays grew its dark pool by telling investors they were diving into safe waters. According to the lawsuit, Barclays’ dark pool was full of predators – there at Barclays’ invitation,” Schneiderman said.
….The allegations date from 2011 until the present, so include the time Jenkins has been in charge. He was promoted to running the bank in the wake of the Libor-rigging scandal which forced out Bob Diamond and other top executives.Jenkins emailed staff – many of whom have been sent on ethics and cultural training – to tell them he would not tolerate any abuse of customers.….The bank refused to say if anyone had been suspended as a result of the attorney general’s lawsuit, but in a statement “noted” the allegations about Barclays’ dark pool. These opaque trading platforms are operated by a number of banks. Barclays’ is called LX Liquidity Cross and has been operating for four years.
….Sandy Chen, banking analyst at Cenkos, believes the US authorities may be considering injunctions on dark pool trading – and suggested that Barclays’ banking licence in New York could be suspended.
….In echoes of the emails and electronic chats provided at the time of Barclays’ £290m fine for rigging Libor, the attorney general cited alleged conversations between staff. “Happy to take liberties if can all agree,” one is quoted as saying. Schneiderman alleges that Barclays was trying make its dark pool the biggest in the US.
The allegations are being made at a time when other European banks are facing action from US regulators – notably BNP Paribas – and when Barclays is also fighting allegations by City regulator the Financial Conduct Authority that it behaved “recklessly” during a 2008 fundraising.
The New York attorney general had been looking at dark pools before the publication of Lewis’s book – Flash Boys: A Wall Street Revolt – which shows how professional investors could trade more quickly to make profits. On CNBC, Schneiderman would not comment on whether others were being investigated but said “the conduct here is so egregious and ongoing we felt we had to move on this”.